May 2008

May 22, 2008

(The following post is not intended to be, nor should be construed as, individual investment advice. Mr. Yetman accepts no responsibility for the specific investment decisions made by anyone on the basis of having read the post.Furthermore, the post is not, nor should be construed as, a solicitation to buy or sell any security.)

Fidelity Investments recently released their 2008 edition of something called The Fidelity Millionaire Outlook.This is an annual survey of millionaires that’s designed to measure how millionaires feel about the economy, both presently as well as with an eye to the future.The Outlook is comprised of five key categories for evaluation: the stock market, real estate, business spending, consumer spending, and the overall economy.The survey translates the results into an index measurement, where a score of +100 represents the most favorable outlook, and a score of -100 represents the most negative outlook.The results of the 2008 survey indicate that millionaires’ current view of the economy is poor (-50), which is down sharply from last year’s indicating figure of +41.However…and this is the part to which you should pay particular attention…their collective view of where things will sit a year from now is a +18, which, while not as high a number as it could be, stands much taller than where the survey results have us sitting at present.

Is there anything useful that you can glean from this information?Indeed.Millionaires are not perfect, and like any other demographic, there are many people within their ranks whose lives we might not care to emulate.Still, when it comes to the matter of making and keeping wealth, it’s a little tough to quarrel with their wisdom on that singular issue.I’ve always been a big believer in the idea that if you want to be successful, you should endeavor to spend time observing successful people.Such is the case here.

The first, and most obvious, conclusion to draw from this survey is that the polled millionaires expect things to be a lot better a year from now than they are currently.That, in and of itself, does not guarantee anything, but it’s interesting to note that this sentiment agrees with what many others in the Wall Street and general business community are saying, as well.Beyond this overall reading of the general economic climate a year from now, the survey revealed that many of these millionaires are preparing for the better days by moving more of their money into the stock market over the course of the next twelve months.The telling figure from the survey, to that end, is that 27 percent of millionaires plan to increase their stock market holdings, while only seven percent plan to decrease them.

Accordingly, I would suggest that you give serious consideration to moving in like fashion.As you may know, I’m not a big believer in having longer-term investors rotate entirely or even substantially out of the stock market, but if you have done so with your money, you may want to follow the lead being provided here by the wealthy and start to move back in.On that note, if you have remained fully invested in equities during this time, you should consider purchasing additional shares of stocks and mutual funds now with any cash you happen to have sitting on the sidelines.

One of the challenges I have in my capacity as head of a registered investment advisor is convincing customers to refrain from doing all of the wrong things when the economic cycle and the stock market fall out of favor with one another.Many well-intentioned folks immediately race to cash out their chips, so to speak, and some find themselves listening more intently to the “doom and gloom” crowd who make their living selling future misery during periods of current misery.As I’ve asked before, unless you think that market is truly going to crash, then why do such a thing?The best thing you can do is to remain invested during these periods, and use the precipitous drop in stock and fund prices as a buying opportunity…but if you won’t take my advice, then at least consider taking it from those who have a lot more to both lose and gain than most of us: the millionaires.